DIG DEEPER INTO DIVIDENDS - An iShares guide to dividend investing with ETFs
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DIG DEEPER
INTO
DIVIDENDS
An iShares guide to dividend investing with ETFs
iCRMH0221U/S-1513325-1/16Investors are increasingly turning to dividend-paying
stocks to seek yield and add stability to portfolios.
Exchange traded funds (ETFs) provide access to a
wide variety of dividend strategies with the benefits of
daily holdings disclosures, low costs and tax efficiency.
iShares ETFs offer the broadest range of dividend
funds designed to help investors meet their goals.*
This guide will cover:
• How dividend investing strategies can potentially help
investors improve their portfolios.
• Key considerations when selecting between high-dividend
and dividend-growth strategies.
• How iShares dividend ETFs offer investors broad exposures
with the potential to reduce risk.
* As of 11/29/2020, BlackRock is one of the largest providers of dividend ETFs based on AUM and number
of dividend ETFs which provide exposure to high dividend strategy or dividend growth strategy stocks.
2 DIG DEEPER INTO DIVIDENDS
iCRMH0221U/S-1513325-2/16CONTENTS
The case for dividend ETFs 4
Learn more about dividend investing with ETFs
and how they can play a role in potentially
improving portfolios in the long-run.
Differentiating between high-dividend
and dividend-growth strategies 10
Compare how high-dividend and dividend-growth
strategies can be used alongside current portfolio
holdings to seek improved investment outcomes.
Explore iShares dividend ETFs 15
Investors should consider a broad range of
opportunities to generate income. iShares offers a
diverse set of solutions to help meet income needs.
DIG DEEPER INTO DIVIDENDS 3
iCRMH0221U/S-1513325-3/16THE CASE
FOR DIVIDEND
ETFs
Investors have long sought out shares of dividend-
paying companies for help meeting a wide variety of
investment objectives.
Seek attractive total returns
1
Dividend strategies, including higher-dividend-
yielding and dividend growth stocks may help to
enhance a key driver of portfolio returns.
Pursue steady income
2
Dividend stocks can provide a regular source of
income and help investors meet current
spending needs.
Reduce risk
3
Dividend-oriented funds have offered lower
volatility and reduced downside risk relative to
other strategies.
4 DIG DEEPER INTO DIVIDENDS
iCRMH0221U/S-1513325-4/16Dividend investing with ETFs
Dividend ETFs bring together a proven investment strategy with the benefits of ETF investing: low costs,
tax efficiency and transparency that includes daily disclosure of holdings.
Total U.S. dividend ETF assets
250
200
150
Assets (billions)
100
50
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Source: BlackRock Global Business Intelligence as of 12/31/2020
Seek attractive total return
Equity investments offer two sources of potential return: dividend income and price appreciation.
The compounding effects of dividend income can be powerful drivers of portfolios returns over time.
For instance, the reinvested dividends for the S&P 500 has explained almost 50% of total equity market
return over the past 30 years.
DIG DEEPER INTO DIVIDENDS 5
iCRMH0221U/S-1513325-5/16S&P 500 returns including dividends exceeded the index’s
price returns by more than double over the past
two decades.
S&P 500 Total return and price return (1987 - 2019)*
3,500%
3,000
2,500
S&P 500 Total Return
2,000
1,500
1,000
500
S&P 500 Price Return
0
Dec/87 Dec/90 Dec/93 Dec/96 Dec/99 Dec/02 Dec/05 Dec/08 Dec/11 Dec/14 Dec/17 Dec/20
Source: S&P as of 12/31/2020. Index performance is for illustrative purposes only. Index performance does not reflect any management fees, transaction costs or
expenses. Indexes are unmanaged and one cannot invest directly in an index. Past performance does not guarantee future results. Index performance does not
represent actual iShares Fund performance. For actual fund performance, please visit iShares.com or blackrock.com.
6 DIG DEEPER INTO DIVIDENDS
iCRMH0221U/S-1513325-6/16Further, portfolios of dividend stocks have realized attractive risk-adjusted returns. Shares of companies that
pay, grow or initiate dividends have historically delivered returns that are less risky relative to shares of
companies that do not pay, cut or eliminate their dividends. The stability of returns for dividend payers,
growers and initiators over time also suggests that dividend stocks may be a quality option for investors
seeking income with less risk in comparison to other non-dividend paying stocks.
Risk and returns of the 500 largest U.S. stocks by dividend policy (1979 - 2019)*
Dividend payers, growers
and initiators have $19,849
demonstrated a history
of strong returns with
less risk
$12,817
$11,526
22.1% 21.8%
$4,300 16.5% 15.1%
Dividend cutters Non-dividend No change Dividend growers
& eliminators payers dividend payers & initiators
Growth of hypothetical $100 Measure of risk represented by standard deviation
Source: BlackRock. Data from 1/1/1979 through 12/31/2020. Historical average returns (%) of dividend categories and standard deviation (%) since 1979. The investment
universe is the 500 largest U.S. stocks by market cap. Dividend policy constituents are calculated on a rolling 12-month basis and are rebalanced monthly. Category returns are
calculated on a monthly basis. Shown for illustrative purposes only. Past performance is not indicative of future returns. The Dividend Growers & Initiators category (“Dividend
Growers” in the chart) represents performance for companies which either increased or initiated their dividend distribution. The No Change category represents performance for
companies which pay a dividend but have not increased nor decreased their dividend distribution. The Nonpayers category represents performance for companies which do not
pay a dividend. The Dividend Cutters & Eliminators category (“Dividend Cutters” in the chart) represents performance for companies which either cut or eliminated their dividend
distribution. Index returns are for illustrative purposes only. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged
and one cannot invest directly in an index. Past performance does not guarantee future results.
DIG DEEPER INTO DIVIDENDS 7
iCRMH0221U/S-1513325-7/16Aim for portfolio income with dividends
Most dividend-oriented ETFs distribute income to investors quarterly, a frequency that can help investors
meet their current spending needs. Fixed bond payments are also regular but tend to be more exposed to
inflation than equities. Because stocks may grow their dividends and realize capital appreciation, they can
be better positioned to keep pace with or exceed inflation over the long term. In recent years, dividends
have come to represent a greater proportion of income than bonds in a typical blended portfolio.
Equity dividends have become the primary source of income in a typical 60/40 portfolio
100
75 Bonds
Source of income (%)
50
25 Equities
0
Dec/99 Dec/02 Dec/05 Dec/08 Dec/11 Dec/14 Dec/17 Dec/20
Since 2000, equities have shifted to become the primary source of income in a typical 60/40 portfolio.
Sources: BlackRock, Bloomberg, and MSCI as of December 2020. The chart depicts the share of income coming from equity dividends in a hypothetical illustrative portfolio that
is made up of 60% MSCI World Index / 40% Bloomberg Barclays US Aggregate Bond Index. Share of income is calculated by dividing the dividend yield on the MSCI World Index
by the total income on the illustrative portfolio, using the yield of the Bloomberg Barclays US Aggregate Bond Index as a proxy for bond income within the illustrative portfolio.
Past performance is no guarantee of future results. The information provided is for illustrative purposes only. It is not possible to invest directly in an index.
8 DIG DEEPER INTO DIVIDENDS
iCRMH0221U/S-1513325-8/16Reduce risk
Dividend-paying stocks have tended to weather down equity markets better than non-payers. This is intuitive:
The ability to consistently pay dividends suggests that a company is mature, has cash flow and cash on hand.
Strong cash flows are a sign of a company that is relatively stable. While never guaranteed, corporate boards
tend to set dividends at levels that can be maintained. Thus, dividend stocks typically pay a cash return
regardless of share price movement, and this income component may help reduce losses in a down market.
Dividend growers and initiators weathered diverse markets
Historical average returns of dividend categories (12/31/1978 - 12/31/2019)
Bull markets Bear markets Overall
30%
20 24.5
20.9
19.5
17.3
10 13.4 12.9
12.2
9.2
0
-10.3
-10
-15.5
-17.9
-20
-29.4
-30
Dividend growers & initiators Dividend cutters & eliminators
Equal-weighted universe Non-dividend payers
Source: Refinitiv, with data from Compustat and IDC. Data from 12/31/1978 through 12/31/2020. The investment universe is the 500 largest U.S. stocks by market cap. Dividend
policy constituents are calculated on a rolling 12-month basis and are rebalanced monthly. Category returns are calculated on a monthly basis. Shown for illustrative purposes only.
Past performance is not indicative of future returns. The Dividend Growers & Initiators category represents historical performance for companies which either increased or initiated
their dividend distribution. The Dividend Cutters & Eliminators category represents historical performance for companies which either cut or eliminated their dividend distribution.
The Equal Weighted category represents historical performance for the 500 largest U.S. stocks by market cap, calculated by assigning the same weighting (0.20%) to each
constituent. The Nonpayers category represents historical performance for companies which do not pay a dividend.
DIG DEEPER INTO DIVIDENDS 9
iCRMH0221U/S-1513325-9/16DIFFERENTIATING
BETWEEN
DIVIDEND
STRATEGIES
Dividend strategies will typically focus either on capturing high dividend yields or
dividend growth — or a combination of both. While each strategy may deliver
attractive results, stocks with high dividend yields may look different from stocks
with high dividend growth rates. They also mean the two strategies tend to
generate little holdings overlap, and can complement each other within a portfolio.
Differences in market outlook, objectives and constraints may help investors
choose between high dividend yield and dividend growth strategies.
10 DIG DEEPER INTO DIVIDENDS
iCRMH0221U/S-1513325-10/16High-dividend strategies
Select companies that have paid out high dividend yields, often with
Exposure
fundamentals-based screens
Sector composition Concentrated in mature industries
Style Predominantly large value
Sensitivity to interest rate changes Higher interest rate sensitivity than dividend growth strategies
High-dividend strategy considerations
• Dividend sustainability screen: The sustainability of a company’s dividend payouts is an important
consideration because a company paying a large dividend today doesn’t guarantee it will pay one next year
or the year after. Additionally, a company that is paying out too much of their earnings as dividends may
curb long-term growth potential, limit earnings and threaten future distributions.
• Distressed companies screen: A high yield is not always an indicator of financial health. It is important for
investors to understand dividend distribution trends as well as recent price movements in the stock.
• Key takeaway: High-dividend funds have numerous ways to screen for dividend sustainability and potential
distress. It is important to understand these screens to seek maximum dividend yield, compare funds and
avoid pitfalls that can result in underperformance.
DIG DEEPER INTO DIVIDENDS 11
iCRMH0221U/S-1513325-11/16Dividend-growth strategies
Select companies that have a history of sustained dividend growth and exhibit metrics that
Exposure
indicate future dividend growth potential
Sector composition Mix of mature industries and mature companies within growth industries
Style Blend of large value and large growth
Sensitivity to interest rate changes Lower interest rate sensitivity than high dividend strategies
Dividend-growth strategy considerations
• Dividend-growth requirement: Dividend-growth screens can apply to long-term dividend growers as well as
companies that have recently begun to grow dividends. Screens that require a long track record for dividend
growth can lead to concentration in mature sectors or mature stocks.
• Dividend payout ratios: Companies with high dividend payout ratios, which compares dividends paid out
with net income, often require further examination. In some cases, a high dividend payout ratio may be the
result of negative fundamentals (falling stock price and/or deteriorating earnings).
• Key Takeaway: Dividend-growth funds have numerous ways to screen for dividend growth and dividend
payout ratios. It is important to understand these screens to seek maximum dividend growth, compare
funds and avoid pitfalls that can result in underperformance.
12 DIG DEEPER INTO DIVIDENDS
iCRMH0221U/S-1513325-12/16iShares high dividend strategy ETFs
iShares ETF Dividend sustainability screen Distressed companies screens
The underlying index for HDV screens stocks The underlying index methodology for HDV
based on their economic moat, which is a incorporates Morningstar’s Distance to Default
iShares Core High
measure of a firm’s ability to maintain its score, which uses market and fundamental data
Dividend ETF (HDV)
competitive advantage over other firms in to measure a firm’s likelihood of defaulting on
its industry. their outstanding debt.
The underlying index for IDV screens out
The underlying index for IDV specifically companies that have a negative trailing
iShares International screens out companies that have too high 12-month earnings-per-share or have
Select Dividend ETF (IDV) of a dividend payout ratio, where a high experienced a falling dividend-per-share
dividend payout may not be sustainable. growth rate, both of which may indicate
financial stress.
The underlying index for DVY screens equity The underlying index for DVY screens out
iShares Select Dividend securities issued by companies that have stocks that have a negative historical five year
ETF (DVY) provided relatively high dividend yields on a dividend-per-share growth rate or has not paid
consistent basis over time. dividends in each of the previous five years.
iShares dividend growth strategy ETFs
iShares ETF Dividend growth requirement Sustainable dividend growth screens
iShares Core Dividend Both underlying indexes for DGRO and IGRO
Growth ETF (DGRO) Both underlying indexes for DGRO and IGRO have additional screens of sustainable dividend
require that companies have at least five growth. First, companies are required to pay out
years of uninterrupted dividend growth no more than 75% of earnings (less than 75%
iShares International
for inclusion. payout ratio). Next, companies in the top decile
Dividend Growth
based on dividend yield are excluded.
ETF (IGRO)
DIG DEEPER INTO DIVIDENDS 13
iCRMH0221U/S-1513325-13/16For advisors, selecting the right dividend strategy
requires understanding an investor’s desired outcome.
Key considerations and questions to ask:
Income needs
• Is the yield sufficient given income needs?
• What measures are used to evaluate a company’s ability to continue to pay dividend yields? Is the screening
forward or backward looking?
• Are there any tax considerations for using this product that might affect total return or realized yield?
Quality
• Is the fund specifically designed to screen for
quality companies?
• How is dividend yield calculated and am I
comparing equally across funds?
Risk
• Does the fund have any dividend risk screens?
• How is dividend risk defined and measured?
• What, if any, process is used to remove
companies that are in distress?
• Are there any risks or biases that are present in
the fund?
When selecting a dividend strategy, it’s
important to consider all of the variables that
might influence dividend investments in order
to avoid potential pitfalls.
14 DIG DEEPER INTO DIVIDENDS
iCRMH0221U/S-1513325-14/16EXPLORE iSHARES
DIVIDEND ETFs
Expense Dividend
Ticker Fund name Exposure
ratio strategy
U.S. dividend-paying ETFs
DVY 0.39% iShares Select Dividend ETF High Exposure to broad-cap U.S. companies with a
Dividend consistent history of dividends
HDV 0.08% iShares Core High Dividend ETF High Access to 75 established, dividend-paying U.S.
Dividend stocks that have been screened for
financial health
IDV 0.49% iShares International Select Dividend ETF High Exposure to broad-cap International companies
Dividend with a consistent history of dividends
DGRO 0.08% iShares Core Dividend Growth ETF Dividend Access U.S. companies that have a history of
Growth sustained dividend growth and that are broadly
diversified across industries
DIVB 0.25% iShares U.S. Dividend and Buyback ETF Other Invests in U.S. companies that return capital to
shareholders through paying dividends and/or
buying back their stock
International dividend-paying ETFs
DVYE 0.49% iShares Emerging Markets Dividend ETF High Exposure to broad-cap Emerging Markets
Dividend companies with a consistent history of dividends
DVYA 0.49% iShares Asia/Pacific Dividend ETF High Exposure to broad-cap companies in Australia,
Dividend Hong Kong, Japan, New Zealand, and Singapore
with a consistent history of dividends
IGRO 0.15% iShares International Dividend Growth ETF Dividend Access international companies that have a
Growth history of sustained dividend growth and that
are broadly diversified across industries
DIG DEEPER INTO DIVIDENDS 15
iCRMH0221U/S-1513325-15/16WANT TO KNOW MORE?
iShares.com
Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing.
This and other information can be found in the Funds’ prospectuses or, if available, the summary prospectuses
which may be obtained by visiting iShares.com or blackrock.com.
Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal.
There is no guarantee that any fund will pay dividends. Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than
other industries, sectors, markets or asset classes and than the general securities market.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse
political, economic or other developments. These risks often are heightened for investments in emerging/developing markets and in concentrations of single countries.
Diversification and asset allocation may not protect against market risk or loss of principal. Transactions in shares of ETFs will result in brokerage commissions and will generate tax
consequences. All regulated investment companies are obliged to distribute portfolio gains to shareholders.
The strategies discussed are strictly for illustrative and educational purposes and are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment
strategy. There is no guarantee that any strategies discussed will be effective. The information presented does not take into consideration commissions, tax implications, or other transactions
costs, which may significantly affect the economic consequences of a given strategy or investment decision.
This document contains general information only and does not take into account an individual’s financial circumstances. This information should not be relied upon as a primary basis for an
investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a
financial advisor before making an investment decision.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
©2021 BlackRock, Inc. All Rights Reserved. BLACKROCK and iSHARES are registered trademarks of BlackRock, Inc. or its subsidiaries in the United States and elsewhere. All other
trademarks are those of their respective owners. GELM-333215-JAN21-US
Not FDIC Insured • May Lose Value • No Bank Guarantee
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